Important Information about the Employee Retention Credit
The Employee Retention Credit (ERC) is a refundable tax credit that was created as COVID relief for businesses employing people during the Pandemic. The credit applies to businesses that had payroll for employees (other than owners) and that had a significant drop in gross receipts. The quarterly gross receipts are compared to the receipts from the same quarter in 2019 to determine if the business qualifies for the credit. The ERC also applies to businesses that were ordered to partially or fully suspend operations. The credit can be worth up to $5,000/$7,000 per employee based on the amount of wages paid to the employee during the qualified period. The eligibility requirement is easier to meet in 2021 than 2020 as only a 20% drop in receipts is required when compared to the same quarter in 2021. New businesses that start after February 15, 2020, with receipts under one million dollars, automatically qualify for the ERC.